Stock surge for Costco
Costco Wholesale Corporation, the American multinational retail corporation, has reported a robust performance for the third quarter of 2025, with net income of $7.6 billion for the past 12 months and a 13% increase in free cash flow (FCF) to $5.9 billion for the fiscal year to date. This growth momentum has been reflected in the company's stock, which saw a 3% increase at 10:30 a.m. ET on Friday.
The Q3 2025 results demonstrated a strong performance, with earnings per share (EPS) of $4.28, a 13% year-over-year increase, and revenue of $63.21 billion, up 8%. These figures surpassed analyst forecasts of $4.23 and $63.1 billion, respectively. The operating income grew by 14%, and the per-share profit increased by the same percentage.
Costco's success can be attributed to several key factors. Membership renewal rates remain high, with 92.7% in North America and 90.2% globally. The total household memberships increased by around 6.6%, reflecting strong customer loyalty. Comparable-store sales growth remains strong, with a 7.9% rise noted recently, significantly outperforming retail competitors like Walmart and Target.
Costco's stock is trading at a premium valuation, with a forward price-to-earnings ratio around 57.5, reflecting high market expectations for continuing growth. Analysts have raised price targets, suggesting that the stock is poised to test resistance levels near $1,050 to $1,075, with potential for new all-time highs depending on Q4 results and outlook for fiscal 2026.
However, it's worth noting that Costco's merchandise costs rose less than 7.5% in the third quarter, despite tariff turmoil. Conversely, selling, general, and administrative expenses rose more than 10%.
Despite the strong performance and bullish price targets, some analysts caution that the stock may be overpriced. Costco's stock costs 66.6 times trailing FCF, and 60.4 times trailing earnings, indicating that the market is pricing in a high level of growth.
In conclusion, while specific analyst EPS or revenue forecasts for the fiscal Q4 2025 quarter are not directly detailed in the available sources, there is a consensus of strong growth momentum, high membership retention, and bullish price targets backed by institutional investor support. The upcoming Q4 earnings and outlook for fiscal 2026 will be key catalysts for confirming these optimistic forecasts.
Given the strong Q3 performance of Costco Wholesale Corporation, investors may be keen on investing more money in the company's business, as the stock's price targets have been raised, indicating a potential for new all-time highs. However, the company's stock is currently trading at a premium valuation, with a high forward price-to-earnings ratio, suggesting that the market is expecting continued growth and finance. Yet, some analysts caution that the stock might be overpriced, with Costco's stock costing 66.6 times trailing FCF and 60.4 times trailing earnings. Therefore, it's essential to monitor the Q4 results and outlook for fiscal 2026 to confirm the optimistic forecasts and ensure a wise investment decision.
